Into the abyss?

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President Trump has asked allies and even China to help keep the Strait of Hormuz open. The situation is desperate. Apparently, the US Navy is reluctant to secure the strait because it increasingly looks like a high-risk proposition.

Ayatollah Mojtaba Khamenei, Iran’s new supreme leader, vowed last week to use the effective closure of the strategic Strait of Hormuz as leverage against the US and Israel. This signals Iran is angry enough to continue the war, suggesting an open-ended disruption of global energy supplies and international travel.

Iran has indicated they will allow selective passage through the strait for vessels from China and other countries not aligned with the US and Israel. I wonder if we are considered a US ally because of American military facilities here under EDCA.

Al Jazeera reports that commercial vessels have been attacked by Iranian coastal missiles, drone boats and sea mines, creating a high-risk environment. Various sources, including Lloyd’s List and Euronews.com, confirm 16 to 20 ships have been hit at Hormuz.

As former British PM Rishi Sunak said: “They (Iranians) are attempting to put a dagger to the throat of the world economy, to make this conflict too costly to sustain.”

The disruption of global energy markets has moved oil prices above $100 per barrel. Shipping companies have been forced to reroute around the Cape of Good Hope, increasing shipping times and costs. All these have started to cause shortages in fertilizer and LNG, threatening global food and energy security.

Our small oil industry players are starting to get worried about availability of supply if Hormuz remains closed. They replenish supply weekly and they need new supply assurances for them to last within the two-to-three-month inventory claimed by the government.

China and South Korea that supply us with diesel and gasoline have stopped exports. Contract cancellations claiming force majeure are making supply beyond April rather iffy by the day.

After all, the regional refineries our small players buy their products from use crude oil that transits through Hormuz. Some refineries including those in Singapore are shutting down units or severely cutting production for lack of crude oil feedstock.

This confirms what I said last week that contrary to what DOE says, supply is a problem and sky-high prices are a given. We are merely a taker when it comes to oil prices. Unless Iran relents or the US successfully assures safe transit in Hormuz, supply is now a problem at any cost.

Oil producing countries affected by the blockage have stopped producing oil because they are running out of storage. Even if Hormuz traffic restarts soon, it will take time to get oil production up to normal after being shut down.

Some economic analysts say a sustained blockage of the Strait of Hormuz for three months is the “tipping point” where the global economy would likely enter a recession.

Says a blog of the London School of Economics: “If America succeeds in restoring commercially viable traffic through Hormuz, the most dangerous economic phase of the conflict may be shortened. If it does not, then the world will move from a short-term oil panic into a more persistent phase of higher energy prices, tighter fuel markets, renewed inflation and slower growth…

“While the physical depletion of global oil reserves takes longer, the macroeconomic and political costs intensify well before stocks are exhausted.”

Here is an economic impact timeline of the crisis:

One month (short-term shock): Oil prices spike instantly due to “fear premiums,” with Brent crude already surpassing $119 per barrel as of March 9, 2026.

Analysts at Fitch Ratings suggest a one-month closure would be a significant but manageable supply shock, likely raising 2026 average oil prices to $70 per barrel without derailing base-case global growth.

Short-term (two to five weeks): Significant pressure hits global supply chains as diverted shipping containers arrive in clusters, causing terminal congestion.

Medium-term (one to three months): This is the critical “manageable window.” Beyond this point, the loss of 20 percent of global oil and 20 percent of global LNG supply becomes impossible to offset with alternative pipelines or reserve releases.

A sustained blockage beyond two to three months is considered a “guaranteed global recession.” Wood Mackenzie indicates that if disruptions exceed two months, “demand destruction” becomes inevitable as alternative energy supplies cannot replace the lost Qatari and UAE volumes.

Long-term (six months+): A prolonged closure could wipe out two percent of global GDP (approximately $2.2 trillion) and push inflation into a “wage-price spiral.”

Here are the recession thresholds:

Price threshold: Analysts identify $140 per barrel as the level at which the global economy tips into a mild recession.

Regional vulnerability: Energy-import dependent nations like Japan, South Korea and the Philippines are expected to face contraction much faster than the global average.

Supply chain collapse: A closure exceeding three months risks “structural damage” to global logistics networks that would take months to unwind even after the strait reopens.

Our oil and gas imports from the Gulf (Middle East) account for approximately 30 percent to 35 percent of the Philippines’ total energy consumption.

For every $10-per-barrel increase in global oil prices, the Philippines’ import costs can rise by nearly $2 billion, equivalent to a reduction of about 0.4 percent to 0.6 percent of GDP.

There isn’t much we can do at this point beyond reducing our energy consumption. Indeed, fuel rationing is inevitable if there is little or no supply available at any price.

Hopefully, those who started this war will not prolong it just to satisfy their need to reassure their bloated egos. We will face a tumultuous six months ahead and hopefully, our leaders won’t be their usual self-centered selves to make it worse for everyone.

We have to work together or sink together into the abyss. This is a world situation we can’t influence much.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco